A triple-blow of tax hikes, rising costs and a squeeze on consumer spending is threatening to wipe out thousands of British retailers, with a string of familiar high street names expected to fall into administration this year.
Nearly 23,000 retailers were under significant financial stress at the end of the first quarter according to insolvency firm Begbies Traynor – a rise of four per cent compared to the year before.
Nick Hood, a business risk adviser at Opus Restructuring, said between five and 10 high-street names could become insolvent this year.
"There will be more casualties going through the summer," he said. "A lot of stakeholders are now thinking there’s been a really fundamental change and I think the trigger for it is business rates... There is clearly a sorting-out going on in certain sectors, such as footwear and middle-market fashion."
Jaeger became the latest high street name to state its intention to shut stores at the end of last week. Twelve other retailers had already entered into administration by the end of March, according to analysis by the Centre for Retail Research (CRR).
Spending on the high street fell by 1.3 per cent in March, card giant Visa said this morning. Its latest consumer spending index revealed weakest quarter for spending growth since 2013.
Richard Hyman, an independent retail analyst, said the number of retail failures will "gain momentum" throughout the year.
"By the end of this year it will be a large number," he said. "A much larger number than post-Lehman brothers."
Fifty-four retailers went into administration in 2008, according the CRR, affecting more than 74,000 employees.
|Year||Companies failing||Stores affected||Employees affected|
|2017 (end March)||12||771||4,675|
Julie Palmer, partner at Begbies Traynor, said that there was a "hodgepodge" of factors making business difficult for retailers, including rising business rates, tough competition, the fall in the value of sterling and rises in the national living wage.
"The effects will be seen right across retail, in smaller and larger business," she said. "There will be some larger names in there as well."
The full impact of changes to business rates, which came into effect at the beginning of April, has not yet been felt by the sector. But even prior to the changes, many firms have found the going too tough.
Last month, Brantano footwear and several of Poundland's 99p Stores collapsed into administration. Jones the Bootmaker was saved from failure by private equity firm Endless, and Store Twenty One entered into talks with lenders after struggling to keep up with rent payments. High street clothing store Jaeger is expected to enter into administration within days.
Hood added that suppliers and credit insurance firms will be looking "very carefully" at the high street retailers he has deemed at risk, and will be making decisions about whether or not they want to support struggling businesses until the Christmas sales period.
The problems in the sector have been exacerbated by fierce competition, especially in food and clothing, making it difficult for retailers to pass on costs. Shop prices continued to fall in March, according to figures from the British Retail Consortium, with prices on clothing and footwear down by as much as 5.9 per cent.